Simulations Plus, Inc.

Previous wording

Revenues increased by $4.1 million, or 23%, to $22.4 million for the three months ended February 28, 2025, compared to $18.3 million for the three months ended February 29, 2024. This increase is primarily due to a $1.9 million, or 16%, increase in software-related revenue and a $2.3 million, or 34%, increase in service-related revenue when compared to the three months ended February 29, 2024. The software-related revenue increase of $1.9 million, or 16%, compared to the three months ended February 29, 2024, was primarily due to additional revenue from ALI of $0.9 million, higher revenues from QSP of $0.4 million, higher revenues from CPP of $0.3 million, and higher revenues from CHEM of $0.2 million. The service-related revenue increase of $2.3 million or 34%, compared to the three months ended February 29, 2024, was primarily due to additional revenue from MC of $2.3 million, higher revenues from CPP of $0.6 million, offset by lower revenue from PBPK of $0.5 million.

Current wording

Revenues increased by $1.8 million, or 10%, to $20.4 million for the three months ended May 31, 2025, compared to $18.5 million for the three months ended May 31, 2024. This increase is primarily due to a $0.7 million, or 6%, in software-related revenue and a $1.1 million, or 17%, increase in service-related revenue when compared to the three months ended May 31, 2024. The software-related revenue increase of $0.7 million, or 6%, compared to the three months ended May 31, 2024, was primarily due to additional revenue from the Pro-ficiency acquisition of $0.4 million. The service-related revenue increase of $1.1 million or 17%, compared to the three months ended May 31, 2024, was primarily due to additional revenue from the Pro-ficiency acquisition of $2.0 million; however this was partially offset by a lower number of insufficient actionable projects and lower utilization from scientific staff.

Previous wording

Cost of revenues increased by $8.3 million, or 85%, for the six months ended February 28, 2025, compared to the six months ended February 29, 2024. This increase is primarily due to a $2.9 million or 123%, increase in software-related cost and a $5.4 million or 73%, increase in service-related costs. The software-related costs increase of $2.9 million or 123%, compared to the six months ended February 29, 2024, was primarily due to additional amortization of $1.7 million as a result of the acquisition of Pro-ficiency, and $0.8 million of higher amortization of capitalized software cost, offset by a decrease of $0.3 million of fully amortized TSRL in the third quarter of fiscal year 2024. The service-related costs increase of $5.4 million or 73%, compared to the six months ended February 29, 2024, was primarily due to additional costs from MC of $3.1 million, and $1.6 million shift from G&A expense to cost of revenues, due to the reorganization of our internal structure from divisions to business units. The $1.6 million increase in cost of revenues corresponds to the $1.6 million decrease in general and administrative expenses discussed below.

Current wording

Cost of revenues increased by $2.0 million, or 39%, for the three months ended May 31, 2025, compared to the three months ended May 31, 2024. This increase is primarily due to a $1.1 million or 81%, increase in software-related cost and a $0.9 million or 23%, increase in service-related costs. The software-related costs increase of $1.1 million or 81%, compared to the three months ended May 31, 2024, was primarily due to additional amortization of $0.8 million as a result of the acquisition of Pro-ficiency and $0.3 million of higher amortization of capitalized software cost driven by the release of GastroPlus in May 2024. The service-related costs increase of $0.9 million or 23%, compared to the three months ended May 31, 2024, was primarily due to additional costs from the Pro-ficiency acquisition of $1.6 million, and a $1.0 million shift from G&A expense to cost of revenues, due to the FY24 reorganization, partially offset by $1.3 million of lower accrued bonuses due to Company performance, lower stock compensation expense of $0.2 million, and lower cost of revenues of $0.2 million due to lower revenues.

Previous wording

Gross profit remained consistent at $13.1 million for the three months ended February 28, 2025 and February 29, 2024. The gross profit increased moderately in our software business by $0.6 million, or 6%, and decreased moderately for our services business by $0.7 million, or 25%, for the three months ended February 28, 2025, compared to the three months ended February 29, 2024.

Current wording

Gross profit decreased marginally to $13.0 million from $13.3 million, or 1.7% for the three months ended May 31, 2025, and May 31, 2024. The gross profit decreased modestly in our software business by $0.4 million, or 4%, and increased moderately for our services business by $0.2 million, or 8%, for the three months ended May 31, 2025, compared to the three months ended May 31, 2024.

Previous wording

Overall gross margin percentage was 59% and 72% for the three months ended February 28, 2025 and 2024, respectively.

Current wording

Overall gross margin percentage was 64% and 71% for the three months ended May 31, 2025 and 2024, respectively, due to the factors described above.

Previous wording

We incurred $2.9 million of research and development costs during the three months ended February 28, 2025. Of this amount, $0.8 million was capitalized as part of capitalized software development costs and $2.1 million was expensed. We incurred $2.1 million of research and development costs during the three months ended February 29, 2024. Of this amount, $0.8 million was capitalized, and $1.3 million was expensed. Research and development spend increased by $0.8 million, or 38%, for the three months ended February 28, 2025, compared to the three months ended February 29, 2024, primarily due to an increase of $0.5 million from the acquisition of Pro-ficiency. The overall increase of $0.8 million, or 38%, corresponds to a 1% increase in research and development expense as a percentage of revenue.

Current wording

We incurred $2.1 million of research and development costs during the three months ended May 31, 2025. Of this amount, $0.9 million was capitalized as part of capitalized software development costs, and $1.2 million was expensed. We incurred $2.1 million of research and development costs during the three months ended May 31, 2024. Of this amount, $0.8 million was capitalized, and $1.3 million was expensed. Research and development spend decreased by $0.1 million, or 2%, for the three months ended May 31, 2025, compared to the three months ended May 31, 2024.

Previous wording

General, and administrative (“G&A”) expenses decreased by $1.0 million, or 17%, to $4.6 million for the three months ended February 28, 2025, compared to $5.5 million for the three months ended February 29, 2024. This corresponds to an 11% decrease in G&A expense as a percentage of revenue. The decrease is primarily driven by a $0.8 million shift from G&A expense to cost of revenues, as referenced above, due to the reorganization of our internal structure from divisions to business units.

Current wording

General, and administrative (“G&A”) expenses decreased by $1.5 million, or 20%, to $6.1 million for the three months ended May 31, 2025, compared to $7.7 million for the three months ended May 31, 2024. The decrease is primarily driven by a $1.0 million shift from G&A expense to cost of revenues, due to the FY24 reorganization, reduction in bonus expense of $0.9 million, lower travel and entertainment expenses of $0.1 million, partially offset by $0.6 million expense related to a company wide employee summit.

Previous wording

Total other income was $0.8 million for the three months ended February 28, 2025, compared to total other income of $0.8 million for the three months ended February 29, 2024. Interest income decreased by $1.2 million due to the use of cash from investment in debt securities to acquire Pro-ficiency and other income increased by $1.1 million due to changes in the fair value of the earnout liability related to the Immunetrics acquisition. The fair value of the earnout liability decreased, as no earnout payment is anticipated related to the second earnout measurement period.

Current wording

Total other income was $0.2 million for the three months ended May 31, 2025, compared to total other income of $2.0 million for the three months ended May 31, 2024. Interest income decreased by $1.4 million due to the use of cash from investment in debt securities to acquire Pro-ficiency and other income decreased by $0.6 million due to changes in the fair value of the earnout liability related to the Immunetrics acquisition. The fair value of the earnout liability decreased, as no earnout payment was earned in the second earnout measurement period.

Previous wording

The provision for income taxes was $0.4 million for the three months ended February 28, 2025, compared to $1.2 million for the three months ended February 29, 2024. Our effective tax rate decreased to 12% mainly due to disqualifying dispositions of incentive stock options for the three months ended February 28, 2025, when compared to 23% for the three months ended February 29, 2024.

Current wording

The benefit for income taxes was $6.7 million for the three months ended May 31, 2025, compared to an expense of $0.8 million for the three months ended May 31, 2024. The Company tax rate decreased to 9.1% for the three months ended May 31, 2025, when compared to 19.4% for the three months ended May 31, 2024. The decrease in the tax rate is primarily due to discrete expenses recognized during the three months ended May 31, 2025.

Previous wording

Revenues increased by $8.6 million, or 26%, to $41.4 million for the six months ended February 28, 2025, compared to $32.8 million for the six months ended February 29, 2024. This increase is primarily due to a $5.0 million, or 26%, increase in software-related revenue and a $3.6 million, or 26%, increase in service-related revenue when compared to the six months ended February 29, 2024. The software-related revenue increase of $5.0 million, or 26%, compared to the six months ended February 29, 2024, was primarily due to additional revenue from ALI of $2.6 million, higher revenues from QSP of $1.5 million, higher revenues from CPP of $1.0 million. The service-related revenue increase of $3.6 million, or 26%, compared to the six months ended February 29, 2024, was primarily due to additional revenue from MC of $4.2 million and higher revenues from CPP of $0.4 million, offset by lower revenue from PBPK of $0.6 million and lower revenue from QSP of $0.4 million.

Current wording

Revenues increased by $10.4 million, or 20%, to $61.7 million for the nine months ended May 31, 2025, compared to $51.3 million for the nine months ended May 31, 2024. This increase is primarily due to a $5.7 million, or 18%, increase in software-related revenue and a $4.7 million, or 23%, increase in service-related revenue when compared to the nine months ended May 31, 2024. The software-related revenue increase of $5.7 million, or 18%, compared to the nine months ended May 31, 2024, was primarily due to additional revenue from the Pro-ficiency acquisition of $3.0 million, higher revenues from CPP of $1.0 million and higher revenues from QSP of $0.9 million as perpetual licenses sales increased. The service-related revenue increase of $4.7 million, or 23%, compared to the nine months ended May 31, 2024, was primarily due to additional revenue from the Pro-ficiency acquisition of $6.2 million offset by lower revenue from PBPK of $0.8 million and lower revenue from QSP of $0.8 million due to soft market conditions.

Previous wording

Cost of revenues increased by $4.2 million, or 83%, for the three months ended February 28, 2025, compared to the three months ended February 29, 2024. This increase is primarily due to a $1.2 million or 92%, increase in software-related cost and a $3.0 million or 80%, increase in service-related costs. The software-related costs increase of $1.2 million or 92%, compared to the three months ended February 29, 2024, was primarily due to additional amortization of $0.8 million as a result of the acquisition of Pro-ficiency, $0.4 million of higher amortization of capitalized software cost, offset by a decrease of $0.2 million of the Therapeutic Systems Research Laboratories (“TSRL”) agreement being fully amortized in the third quarter of fiscal year 2024. The service-related costs increase of $3.0 million or 80%, compared to the three months ended February 29, 2024, was primarily due to additional costs from MC of $1.6 million, $0.2 million of higher accrued bonuses, and a $0.8 million shift from G&A expense to cost of revenues, due to the reorganization of our internal structure from divisions to business units. The $0.8 million increase in cost of revenues corresponds to the $0.8 million decrease in general and administrative expenses discussed below.

Current wording

Cost of revenues increased by $10.3 million, or 69%, for the nine months ended May 31, 2025, compared to the nine months ended May 31, 2024. This increase is primarily due to a $4.0 million or 108%, increase in software-related cost and a $6.3 million or 56%, increase in service-related costs. The software-related costs increase of $4.0 million or 108%, compared to the nine months ended May 31, 2024, was primarily due to additional cost of revenues of $3.0 million as a result of the Pro-ficiency acquisition out of which $2.5 million is from amortization of developed technology from the acquisition of Pro-ficiency, and $1.0 million of higher amortization of capitalized software cost driven by the release of GastroPlus in May 2024, offset by a decrease of $0.4 million of fully amortized TSRL in the third quarter of fiscal year 2024. The service-related costs increase of $6.3 million or 56%, compared to the nine months ended May 31, 2024, was primarily due to additional costs from the Pro-ficiency acquisition of $4.7 million, and $2.6 million shift from G&A expense to cost of revenues, due to the FY24 reorganization. The $2.6 million increase in cost of revenues corresponds to the $2.6 million decrease in general and administrative expenses discussed below, partially offset by $1.2 million of lower accrued bonuses due to Company performance.

Previous wording

Gross profit increased by $0.3 million or 1%, to $23.3 million for the six months ended February 28, 2025, compared to $23.1 million for the six months ended February 29, 2024. The gross profit increased in our software business by $2.1 million, or 13%, and decreased for our services business by $1.8 million, or 30%, for the three months ended February 28, 2025, compared to the three months ended February 29, 2024.

Current wording

Gross profit remained relatively flat at $36.4 million for the nine months ended May 31, 2025, compared to $36.3 million for the nine months ended May 31, 2024. Gross profit increased in our software business by $1.7 million, or 6%, and decreased for our services business by $1.6 million, or 18%, for the nine months ended May 31, 2025, compared to the nine months ended May 31, 2024.

Previous wording

We incurred $5.5 million of research and development costs during the six months ended February 28, 2025. Of this amount, $1.5 million was capitalized as a part of capitalized software development costs and $4.0 million was expensed. We incurred $4.3 million of research and development costs during the six months ended February 29, 2024. Of this amount, $1.8 million was capitalized and $2.5 million was expensed. Research and development spend increased by $1.2 million, or 28%, for the six months ended February 28, 2025, compared to the six months ended February 29, 2024, primarily due to an increase of $0.9 million from the acquisition of Pro-ficiency. The research and development expense as a percentage of revenue remained consistent for the six months ended February 28, 2025 and February 29, 2024, respectively.

Current wording

We incurred $7.6 million of research and development costs during the nine months ended May 31, 2025. Of this amount, $2.4 million was capitalized as a part of capitalized software development costs and $5.2 million was expensed. We incurred $6.4 million of research and development costs during the nine months ended May 31, 2024. Of this amount, $2.6 million was capitalized and $3.8 million was expensed. Research and development spend increased by $1.2 million, or 18%, for the nine months ended May 31, 2025, compared to the nine months ended May 31, 2024, primarily due to an increase of $1.2 million from the acquisition of Pro-ficiency.

Previous wording

Sales and marketing expenses increased by $2.6 million, or 67%, to $6.6 million for the six months ended February 28, 2025, compared to $3.9 million for the six months ended February 29, 2024. This corresponds to a 4% increase in sales and marketing expense as a percentage of revenue. The increase was primarily due to an increase of $0.8 million from the acquisition of Pro-ficiency, $0.9 million in higher event-related spending to enhance brand awareness and customer engagement, increased sales commission of $0.3 million, and increased headcounts of $0.1 million. This strategic investment in sales and marketing reflects our ongoing efforts to drive growth, strengthen market presence, and improve customer engagement.

Current wording

Sales and marketing expenses increased by $2.9 million, or 46%, to $9.2 million for the nine months ended May 31, 2025, compared to $6.3 million for the nine months ended May 31, 2024. The increase was primarily due to an increase of $1.3 million from the acquisition of Pro-ficiency, $0.4 million in higher event-related spending to enhance brand awareness and customer engagement, increased headcount costs of $0.7 million, $0.3 million incurred to support our business development efforts, and increased sales commission to employees of $0.1 million.

Previous wording

General, and administrative (“G&A”) expenses decreased by $1.3 million, or 11%, to $9.9 million for the six months ended February 28, 2025, compared to $11.2 million for the six months ended February 29, 2024. This corresponds to an 11% decrease in G&A expense as a percentage of revenue. The decrease is primarily driven by a $1.6 million shift from G&A expense to cost of revenues, as referenced above, due to the reorganization of our internal structure from divisions to business units, offset by an increase of $0.5 million from the acquisition of Pro-ficiency.

Current wording

General, and administrative (“G&A”) expenses decreased by $2.8 million, or 15%, to $16.1 million for the nine months ended May 31, 2025, compared to $18.9 million for the nine months ended May 31, 2024. The decrease is primarily driven by a $2.6 million shift from G&A expense to cost of revenues, as referenced above, due to the FY24 reorganization and a decrease in bonus expense of $1.2 million, partially offset by an increase of $0.9 million from the acquisition of Pro-ficiency.

Previous wording

Total other income was $0.9 million for the six months ended February 28, 2025, compared to total other income of $2.3 million for the six months ended February 29, 2024. $2.3 million of the decrease in interest income is attributable to the use of cash from investment in debt securities to acquire Pro-ficiency, partially offset by a $1.0 million increase due to the decrease in the fair value of the Immunetrics earnout liability, as no earnout payment is anticipated related to the second earnout measurement period.

Current wording

Total other income was $1.1 million for the nine months ended May 31, 2025, compared to total other income of $4.3 million for the nine months ended May 31, 2024. $3.7 million of the decrease in interest income is attributable to the use of cash from investment in debt securities to acquire Pro-ficiency, partially offset by a $0.4 million increase due to the decrease in the fair value of the Immunetrics earnout liability, as no earnout payment is anticipated related to the second earnout measurement period.

Previous wording

We continue to seek opportunities for strategic acquisitions, investments, and partnerships. If one or more strategic opportunities are identified, a substantial portion of our cash reserves may be required to complete it. If we identify an attractive strategic opportunity that would require more cash to complete than we are willing or able to use from our cash reserves, we may consider financing options to complete the transaction, including obtaining loans or selling our securities. Additionally, our quest for strategic opportunities could result in a significant change to our liquidity position and/or our results of operations if any such opportunities are completed.

Current wording

We continue to seek opportunities for strategic acquisitions, investments, and partnerships. If one or more strategic opportunities are identified, a substantial portion of our cash reserves may be required to complete the transaction. If we identify an attractive strategic opportunity that would require more cash to complete than we are willing or able to use from our cash reserves, we may consider financing options to complete the transaction, including obtaining loans or selling our securities. Additionally, our quest for strategic opportunities could result in a significant change to our liquidity position and/or our results of operations if any such transactions are completed.

Previous wording

At February 28, 2025, the Company had $11.0 million in cash and cash equivalents, $10.4 million in short-term investments, and working capital of $36.0 million. Short-term investments consist of highly liquid investment-grade fixed-income securities, diversified among industries and issuers. The investments are U.S.-dollar-denominated securities. Our fixed-income investments are exposed to interest rate risk and credit risk. The settlement risk related to these investments is insignificant, given that the short-term investments held are primarily highly liquid investment-grade fixed-income securities and can readily be converted to cash when needed.

Current wording

At May 31, 2025, the Company had $27.0 million in cash and cash equivalents, $1.5 million in short-term investments, and net working capital of $41.6 million. Short-term investments consist of highly liquid investment-grade fixed-income securities, diversified among industries and issuers. The investments are U.S.-dollar-denominated securities. Our fixed-income investments are exposed to interest rate risk and credit risk. The settlement risk related to these investments is insignificant, given that the short-term investments held are primarily highly liquid investment-grade fixed-income securities and can readily be converted to cash when needed.

Previous wording

Net cash provided by operating activities was $4.4 million for the six months ended February 28, 2025. Our operating cash flows resulted in part from our net income of $3.3 million, offset by cash payments we made to third parties for their services and employee compensation. The changes in balances of assets of $6.2 million was primarily due to change in accounts receivables driven by higher revenues and invoicing that occurred closer to the end of the current quarter. The changes in liabilities balances of $1.2 million were primarily due to higher deferred revenues of $1.4 million driven by higher invoicing that occurred closer to the end of the current quarter and timing of revenue recognition.

Current wording

Net cash provided by operating activities was $12.5 million for the nine months ended May 31, 2025. Our operating cash flows resulted in part from our net loss of $64.0 million, offset by cash payments we made to third parties for their services, employee compensation, and non-cash impairment charges. The changes in balances of assets of $4.1 million was primarily due to change in accounts receivables driven by higher revenues and invoicing that occurred closer to the end of the current quarter and higher prepaid income taxes of $1.2 million driven by timing of cash tax payments. The changes in liabilities balances of $0.8 million were primarily due to higher deferred revenues of $2.3 million driven by higher invoicing that occurred closer to the end of the current quarter and timing of revenue recognition, and higher accounts payable of $1.1 million driven by timing of payments, offset by lower bonus accrual of $2.4 million driven by lower business performance.

Previous wording

Net cash provided by operating activities was $6.0 million for the six months ended February 29, 2024. Our operating cash flows resulted primarily from our net income of $6.0 million. In addition, $3.9 million related to changes in balances of operating assets and liabilities was added to net income and $3.9 million related to noncash charges was added to net income to reconcile to cash flow from operations. The changes in balances of other liabilities of $1.1 million were primarily driven by accrued liabilities of $2.4 million for investments, bonus accrual of $2.4 million, offset by $3.1 million of bonus payments and lower deferred revenues of $0.6 million. The changes in balances of prepaid expenses and other current assets are primarily due to increase in accounts receivables driven by timing of invoicing and an increase in prepaid expenses of $1.7 million.

Current wording

Net cash provided by operating activities was $11.7 million for the nine months ended May 31, 2024. Our operating cash flows resulted primarily from our net income of $9.1 million. In addition, $3.0 million related to changes in balances of operating assets and liabilities was added to net income and $5.6 million related to noncash charges was added to net income to reconcile to cash flow from operations.

Previous wording

Net cash provided by operating activities decreased by $1.6 million during the six months ended February 28, 2025, compared to the six months ended February 29, 2024. This decrease was driven by drivers as explained above for both comparative periods.

Current wording

Net cash provided by operating activities decreased by $0.9 million during the nine months ended May 31, 2025, compared to the nine months ended May 31, 2024. This decrease was driven by drivers as explained above for both comparative periods.

Previous wording

Net cash used in investing activities during the six months ended February 29, 2024, was $24.4 million, primarily due to purchase of short-term investments of $49.0 million, purchase of long-term investments of $58.0 million, and computer software development costs of $1.7 million, offset by the proceeds from maturities of short-term investments of $36.3 million.

Current wording

Net cash provided by investing activities during the nine months ended May 31, 2025, was $5.4 million, primarily due from maturities of short-term investments of $14.0 million and sale of short-term investments of $1.0 million, partially offset by the purchase of short-term investments of $6.5 million and computer software development costs of $2.1 million,

Previous wording

Net cash used in investing activities during the six months ended February 28, 2025, was $2.5 million, primarily due to purchase of short-term investments of $5.0 million and computer software development costs of $1.3 million, offset by proceeds from maturities of short-term investments of $3.6 million.

Current wording

Net cash provided by investing activities during the nine months ended May 31, 2024, was $45.5 million, primarily due to the sale of investments for $45.1 million and maturities of short-term investments for $71.1 million. This was partially offset by purchase of short-term investments of $67.2 million and computer software development costs of $2.5 million.

Previous wording

Net cash used in financing activities during the six months ended February 28, 2025, was $1.3 million, primarily due to cash settlement of $1.6 million from the holdback obligation related to the Immunetrics acquisition, offset by proceeds from the exercise of stock options totaling $0.3 million.

Current wording

Net cash used in financing activities during the nine months ended May 31, 2025, was $1.3 million, primarily due to cash settlement of $1.6 million from the holdback obligation related to the Immunetrics acquisition, offset by proceeds from the exercise of stock options totaling $0.3 million.

Previous wording

Net cash used in financing activities during six months ended February 29, 2024, was $2.1 million, primarily due to dividend payments totaling $2.4 million, offset by proceeds from the exercise of stock options totaling $0.3 million.

Current wording

Net cash used in financing activities during nine months ended May 31, 2024, was $5.6 million, primarily due to dividend payments totaling $3.6 million and the first cash earnout payments in the aggregate amount of $2.5 million to the former equity holders and employees of Immunetrics, partially offset by proceeds from the exercise of stock options totaling $0.5 million.

Previous wording

During the quarter ended February 28, 2025, the Company completed the final payment of $1.6 million related to the holdback liability from the Immunetrics acquisition. Additionally, based on earned revenue for Immunetrics during the second earnout measurement period, the Company has assessed the fair value of the earnout liability to be zero. However, the final settlement with the sellers is pending, and while the Company does not anticipate any earnout payment, it is still subject to final determination.

Current wording

During the quarter ended February 28, 2025, the Company completed the final payment of $1.6 million related to the holdback liability from the Immunetrics acquisition. Additionally, based on Immunetrics' performance during the second earnout measurement period, the Company reassessed the fair value of the related contingent consideration and determined it to be zero as of February 28, 2025. In the quarter ending May 31, 2025, the Company reached a final settlement with the sellers, confirming that no earnout payment was due, consistent with the previously recorded assessment.

Previous wording

For the three and six months ended February 28, 2025, and February 29, 2024, respectively, we did not repurchase any shares of Company stock. As of February 28, 2025, $30 million remains available for additional repurchases under our authorized repurchase program. However, we are not obligated to repurchase any additional shares, and the timing, manner, price, and actual amount of further share repurchases will depend on a variety of factors, including stock price, market conditions, other capital management needs and opportunities, and corporate and regulatory considerations. The share repurchase program has no expiration date but may be terminated at any time at our Board of Directors’ discretion.

Current wording

For the three and nine months ended May 31, 2025, and May 31, 2024, respectively, we did not repurchase any shares of Company stock. As of May 31, 2025, $30 million remains available for additional repurchases under our authorized repurchase program. However, we are not obligated to repurchase any additional shares, and the timing, manner, price, and actual amount of further share repurchases will depend on a variety of factors, including stock price, market conditions, other capital management needs and opportunities, and corporate and regulatory considerations. The share repurchase program has no expiration date but may be terminated at any time at our Board of Directors’ discretion.

Previous wording

Our financial statements and accompanying notes are prepared in accordance with GAAP. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Actual results could differ from those estimates. Significant accounting policies for us include revenue recognition, accounting for capitalized software development costs, valuation of stock options, and accounting for income taxes.

Current wording

Our financial statements and accompanying notes are prepared in accordance with GAAP. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Actual results could differ from those estimates. Critical Accounting Estimates for us include revenue recognition, accounting for capitalized software development costs, accounting for intangible assets and goodwill, valuation of stock options, business acquisitions and accounting for income taxes.

Previous wording

Software development costs are capitalized in accordance with ASC 985-20, “Costs of Software to Be Sold, Leased, or Marketed.” Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale. The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized computer software development costs require considerable judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life, and changes in software and hardware technologies. Capitalized software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in the Company’s software products. Total capitalized computer software development costs were $0.8 million and $0.8 million for the three months ended February 28, 2025, and February 29, 2024, respectively, and $1.5 million and $1.8 million for the six months ended February 28, 2025, and February 29, 2024, respectively.

Current wording

Software development costs are capitalized in accordance with ASC 985-20, “Costs of Software to Be Sold, Leased, or Marketed.” Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale. The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized computer software development costs require considerable judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life, and changes in software and hardware technologies. Capitalized software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in the Company’s software products. Total capitalized computer software development costs were $0.9 million and $0.8 million for the three months ended May 31, 2025, and May 31, 2024, respectively, and $2.4 million and $2.6 million for the nine months ended May 31, 2025, and May 31, 2024, respectively.

Previous wording

Amortization of capitalized computer software development costs is calculated on a product-by-product basis on the straight-line method over the estimated economic life of the products, not to exceed five years. Amortization of software development costs amounted to $0.8 million and $0.4 million, respectively, for the three months ended February 28, 2025, and February 29, 2024, respectively, and $1.6 million and $0.8 million for the six months ended February 28, 2025, and February 29, 2024, respectively. We expect future amortization expense to vary due to variations in capitalized computer software development costs.

Current wording

Amortization of capitalized computer software development costs is calculated on a product-by-product basis on the straight-line method over the estimated economic life of the products, not to exceed five years. Amortization of software development costs amounted to $0.8 million and $0.5 million, respectively, for the three months ended May 31, 2025, and May 31, 2024, respectively, and $2.4 million and $1.3 million for the nine months ended May 31, 2025, and May 31, 2024, respectively. We expect future amortization expense to vary due to variations in capitalized computer software development costs.

Previous wording

Goodwill is tested for impairment at the reporting unit level, which is one level below or the same as an operating segment. As of February 28, 2025, the Company determined that it had six reporting units: CHEM, PBPK, QSP, CPP, MC, and ALI.

Current wording

Goodwill is tested for impairment at the reporting unit level, which is one level below or the same as an operating segment. As of May 31, 2025, the Company determined that it had nine reporting units: CHEM Software, PBPK Software, QSP Software, CPP Software, ALI/MC Software, PBPK Services, CPP Services, QSP Services, and ALI/MC Services.

Previous wording

As of February 28, 2025, the entire balance of goodwill was attributed to four of the Company's reporting units, CPP, QSP, ALI, and MC. Intangible assets subject to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. No impairment losses were recorded during the three and six months ended February 28, 2025, and February 29, 2024, respectively.

Current wording

As of May 31, 2025, the entire balance of goodwill was attributed to six of the Company's reporting units, CPP Software, CPP Services, QSP Software, QSP Services, ALI/MC Software, and MC Services. Intangible assets subject to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. As a result of the quantitative impairment test performed, the Company determined goodwill was impaired for its QSP Software, ALI/MC Software and MC Services reporting units and recorded a goodwill impairment charge of $1.8 million, $13.3 million and $36.7 million, respectively during the period ended May 31, 2025. Such charges are recorded in Impairments on the condensed consolidated statements of operations and comprehensive (loss) income.

Previous wording

Research and development costs are charged to expense as incurred until technological feasibility has been established, or when the costs are for maintenance and minor modification of existing software products that do not add significant new capabilities to the products. These costs include salaries and benefits, laboratory experiments, and purchased software that was developed by other companies and incorporated into, or used in the development of, our final products.

Current wording

R&D costs are charged to expense as incurred until technological feasibility has been established, or when the costs are for maintenance and minor modification of existing software products that do not add significant new capabilities to the products. These costs include salaries and benefits, laboratory experiments, and purchased software that was developed by other companies and incorporated into, or used in the development of, our final products.

Previous wording

The Company accounts for stock options in accordance with ASC 718-10, “Compensation-Stock Compensation.” Under this method, compensation costs include the estimated grant-date fair value of awards amortized over the options’ vesting period. Stock-based compensation costs, not including shares issued to directors for services, were $1.6 million and $1.6 million, for the three months ended February 28, 2025, and February 29, 2024, respectively, and $3.3 million and $2.9 million for the six months ended February 28, 2025, and February 29, 2024, respectively.

Current wording

The Company accounts for stock options in accordance with ASC 718-10, “Compensation-Stock Compensation.” Under this method, compensation costs include the estimated grant-date fair value of awards amortized over the options’ vesting period. Stock-based compensation costs, not including shares issued to directors for services, were $1.4 million and $1.7 million, for the three months ended May 31, 2025, and May 31, 2024, respectively, and $4.7 million and $4.6 million for the nine months ended May 31, 2025, and May 31, 2024, respectively.